How Shutterstock Went From Zero to IPO

Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, theSan Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.

After a summer of lackluster tech IPOs, the stock-image company Shutterstock's initial public offering in October stunned the market. It was the first New York tech firm to go public in two years, and raised $76.5 million--well above what was expected--at its debut. The service offers more than 20 million photographs from 35,000 approved image-contributors, and sells about two images each second to customers who subscribe at $249 a month. Shutterstock's market cap was recently more than $760 million. That has a lot to do with serial tech entrepreneur Jon Oringer, who founded the company in 2003 with just an idea and an $800 camera. Oringer--who today reportedly owns 57% of Shutterstock--spoke with Inc.'s Christine Lagorio earlier this year about how he bootstrapped the company without outside funding.

Let's talk about the very beginning. When did you start working on Shutterstock?I started in 2003 by shooting 100,000 images--everything I could find--over about six months. I grabbed a Canon Digital Rebel, which was $800 at the time. I culled the images down to 30,000 and put them on the website. I needed to seed it somehow.

Did you have help or investment?I funded it myself. That's because I started out of my own need for a product that didn't exist. I've never taken venture capital for any of the dozen or so companies I've started, including SurfSecret Software, one of the first pop-up blockers on the Internet. I was always looking for images, and they were $500 or I had to call people to get the rights.

How did you turn 30,000 photos into a business?It was pretty much a company right away. People were buying my images. Since digital cameras were coming down in price, and digital SLRs were being put in everyday peoples' hands, I knew they could become professional photographers eventually. At the time I was trying to go with a sort of old media model, of trying to collect and put up as much content as I could, and buy photos from other photographers.

What was it like in the early years?The whole "have an idea, run out, and find money" model was never how I wanted to do it. I didn't want to get outside money, so I was doing everything myself. That was my way to learn. I needed photographers, so I became a photographer. The first customer service e-mails that came in, I answered those myself. I programmed the site in Perl. A lot of those experiences from early on still inform the decisions I make today.

I wasn't eating ramen, but it was close. I was spending more money on the business than myself, but I was spending my own money at least. The first server stack was built in my apartment in Gramercy Park [in New York City]. A little trick: In the winter you don't need the heaters any more if you have, like, 10 servers. But once they were blowing out the circuit breakers in the basement, I knew I needed to expand. And around then the demand was so big that I couldn't fulfill it.

How did you cope with that?I knew I had to take a risk. The big change that happened was when I started getting other photographers interested in contributing their own content. I turned my one contributor account into an entire upload system for anyone. So I opened up Shutterstock to the entire world, and created a contributor community. Anyone could give stock photography a shot.

And they stuck around?We were paying our photographers right away. We started with the subscription product, which we still have today. The idea is that the buyer can download 25 images a day for $249 a month. The seller gets between 25 cents and a few dollars a download, depending on the type of account they have. The trick to the way I started this was to put yourself in the shoes of both the content creator and the buyer. Whatever business you're creating, you sort of need to know exactly what the customer is thinking.

Was there any moment you were uncertain whether your pricing model would work?I knew this leap could either put me out of business or create the perfect marketplace model. This kind of model had never been created before. This was an all-you-can-eat model on one side, and contributors on the other side that needed to get paid at the right rate per image.

And you never got a cash infusion?Not in the beginning. Eventually we took a small [private equity] round in 2007. It wasn't because we needed it (the company pretty much funds itself). It was just a risk-offsetting move, plus, I was looking for a smart investor to help me scale up the management team and build out the processes for growing a 40-person company to a 200-person company.

What's your biggest challenge now?There are a few. For me personally, we are at 200 employees right now, and keeping the culture the same has been a particular challenge. At a certain point you can't interact with all these people, and it's hard to keep that fun hacking kind of culture going. You have to constantly fight against the bureaucracy.

What's next?We are expanding in a lot of different directions. We are functional in 10 languages now; we answer the phone in all 10 languages. We translate the images. We continue to look for pain points for our customers or contributors. We are working on new ways for people to find the images they want. Do you want a high-contrast photo? A photo with three people in it? We're playing with all those types of things. We're a tech company more than an image company.